Disability Insurance Articles
Are You Ready For Instant Retirement?
by Steve Crawford
E-Mail Steve Crawford
What Does Your Retirement Strategy Look Like?
Many of us put the maximum amount we can into our 401(k)s, have mutual funds that we are funding regularly, defined contribution or defined benefit plans, and have spent a lot of time preparing for that wonderful day when we can look our spouse in the eyes and say it’s okay to retire now. Can you imagine how nice would it be to look at your portfolio and say you have enough money to retire now? It’s over; you no longer have to leave the house every morning to go work all day long. Today is the day that you no longer report to any managers or any customers. This is the point in your life when you get to do everything you have always wanted to do. You are now RETIRED.
This is a day that all of us will hopefully have at some point in our 60’s, or if we are lucky maybe even in our 50’s, if everything goes according to our dream plan. The bottom line is that most individuals have an age in mind when they expect to retire. My age is 60; everything I do is part of a plan for me to retire at age 60. What would happen if I had to retire today? No choices offered; “something” happens and I am too sick or injured to work anymore, and today essentially becomes the beginning of an instant retirement. This is not something most people will accept as a possibility. It does not fit into their mental image of what their personal retirement will look like. After all, you are going to retire to a nice home in a golf course community with all of your friends in an area surrounded by your family who will have lots of grandchildren, right? You're not willing to accept a retirement at age 37 because of a disease or accident that was not part of the master plan.
A long term disability, if not protected well by an individually owned disability insurance policy, can turn into instant retirement. I’m not talking about getting into a car accident on your way home from the office, while it could happen that way, statistically you are more likely to suffer from an illness than you are from an accident preventing you from being able to work any longer*. So many people today rely on their employers to provide the appropriate insurance. Maybe your employer does offer you group long term disability insurance, but there is a good chance you have either no LTD, or what you have is not enough.
Why We Need Personal Disability Insurance
The concept of “Instant Retirement” should bring home the entire need for individual disability insurance. There is a reason you still wake up in the morning, brush your teeth, have a cup of coffee, and jump into your car to head to the office. The reason is you are not in a position to retire right now. You don’t have enough money now to support you and your family for the rest of your life. Therefore you go to work five days a week or more in order to save up enough money so that you may one day retire comfortably. I sincerely hope everybody one day has enough money so that they can retire from working, and spend time with their loved ones. The problem is that a disability could strike at any point in time without warning. A routine general physical at any age could turn up a dreaded disease, and you know an illness does not discriminate based on incomes or ages. You can just as easily end up with cancer or diabetes at age 35 as you could at age 55.
My point in this article is for people to think of individual disability insurance coverage as protection from instant retirement. You need to spend just as much time making sure your income is protected against an instant retirement through individual disability insurance as you do checking the performance of your portfolio. A long term disability can strike anybody and at anytime, and the general public needs to understand that, and they need to feel what the ramifications would be like if today they woke up and were never able to work again. What would life be like if the money you have now has to last you until you pass away from old age? However if you purchased an individual disability insurance policy, even if you did become disabled, and unable to work, you know that you will always have an income source during your working years. Individual disability insurance policies pay you a tax free monthly benefit equivalent to about 60% of your income every month you are disabled, and the best policies available also make sure you financially recover as you transition back to work.
The cost of an individual disability insurance policy is usually 1-3% of your annual income, and that is a small price to pay to guarantee the financial stability of your family against a long term disability. The number one motivation for people to purchase their own personal disability insurance policy is to protect their families. Whether or not you have a family, or are still single, only a quality individual disability insurance policy can make sure that you are protected against an unexpected instant retirement. A company paid group LTD plan might give you a little protection, but it is nowhere near enough to actually provide a standard of living you could handle during an extended disability.
Published August 8, 2007 by Steve Crawford